Playing the Trading Game With Discipline

Trading is the most engaging and challenging activity I do that actually pays me to play. The second most engaging/challenging activity I enjoy is paintball. But a very close third activity I enjoy (and relevant for this post’s purpose) is playing Texas Hold’em Poker.

My cousin and fellow rounder, the one and only “T”, had the usual conversation…discussing poker, trading and what each of us was doing to become better at each one respectively. Of course, the conversation always leads to how similar the attributes needed to do well at one are directly applicable to doing well at the other. And this of course shouldn’t come as any surprise since both activities involve putting money at risk and pitting your skills against the skills of other “players” – with trading this means other traders.

A very good read that hits on many of these similarities (and for the most part I agree with the article) can be found at WallStCheatSheet.com here.

The attributes that I think are the hardest for most people to master is discipline. Once you have the framework of your trading approach (ie. entries, exits, money management, risk capital, etc.) in place, you need to have the discipline to carry out the plan with solid emotional control so that you can succeed and do well at it. Any lapse in judgement or with one’s emotions (read about a recent lapse I had in a previous post, “A Lesson in Sicking With the Plan“) that is allowed to run unchecked will eventually lead to your ruin.

Discipline is required to consistently carry out the following in trading:

• Mechanical Aspect - Executing the trading plan; maintain level-headed decisions
• Emotional Aspect - Keeping emotions (fear, greed, euphoria, etc.) under control

Controlling the emotional aspect is the most important because without it you won’t do very well at carrying out the mechanical aspect. Basically, if you’re allowing decisions to be influenced by emotional extremes that everyone faces from time to time, it’s less likely that you’ll be able to make clean level-headed decisions with regards to reading the market or handling your trades. Being able to make rational decisions consistently over time is necessary for any successful trader. Having a lapse which leads to a mistake every now and then is simply being human…but you can’t let it get out of control. Recognize a lapse when it happens, make a conscious effort to prevent it from happening the next time, and learn from the experience.

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